From a recent issue of Barron's:
WE'RE GRATEFUL FOR JAMES CRAMER. For whenever things look especially grim -- as they often do these days, colored by the dispatches from Iraq -- and we're pretty much at a loss for anything immediately at hand to provide a bit of cheer, we can depend on Mr. Cramer for comic relief. Mr. Cramer, as you're doubtless aware, is rather a ubiquitous presence in several special venues: Tout TV, for one, where he partners with Larry Kudlow, a made-for-television economist, doing financial shtick, and, for another, TheStreet.com, of which he's a proud founder and where he contributes a running stream of consciousness, agurgle with wild stock talk, untethered investment advice and spongy and soggy apercus.
Understand, if you will, that Mr. Cramer is not deliberately bent on lightening our mood or, so far as we know, anyone else's. But the absence of comedic intent doesn't in the slightest diminish our gratitude. All we know is that when we need it most, we can count on him to provide a chuckle.
What prompts this modest paean to Mr. Cramer was his earnest online urgings a fortnight or so ago that subscribers consider the merits of six stocks, disparate in almost every way except that they all exhibited dazzling speculative momentum. Or, as he nicely and concisely put it, "they go up," and do so with breathtaking persistence. Not to keep you in suspense, Cramer's sexy six are: WebEx, Netflix, Amedisys, Armor Holdings, XM Satellite Radio and Taser International.
We hasten to add the forecasts are not ours, but those of analysts or management. So it's not completely outside the realm of possibility that they could prove a tad too optimistic and that the valuations are commensurately understated.
Although Mr. Cramer exudes enthusiasm for all six, seasoned Street trooper that he is, he cautions, in the interest of prudence, against buying every one of them; instead, he prescribes "one or two" as part of a "discretionary portfolio," which he thoughtfully explains "as not meant for retirement but meant to augment income." A few sentences later, he ups the emotional ante by exhorting his starting-to-salivate readers to "embrace some of the untried and perhaps untrue as part of your portfolio during your search for ways to make big money in the market."
Alas, Mr. Cramer coyly refrains from advising big-money hunters specifically which one or two of those luscious prospective winners to set their sights on. Nor, alas again, does he proffer any guidance on how to tell the "untried" from the "untrue" for those of us cursed with an innate squeamishness that makes us reluctant to embrace, or even get acquainted with, the untrue. Nothing for it, we guess, but to make do with our own smell test and pray that our untutored noses are up to the job.
As a shamefully sporadic reader, and even less frequent viewer, of Mr. Cramer, we feel compelled to credit for rousing our interest in his stellar selection of untried and perhaps untrue picks an anonymous letter on money manager Bill Fleckenstein's Website that was kindly forwarded to us by someone named Fiscal Concern. Mr. Concern also directed attention to a speech Mr. Cramer gave in February 2000 on a similar group of stocks, entitled with characteristic restraint, "The Winners of the New World."
Mr. Cramer, apparently in a more expansive mood in those dewy days of early 2000, offered 10 stocks, rather than just six, that were sure-fire winners. They also were happily not household names and most were further blessed, as he told his presumably rapt audience, in that they "don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come." What a relief!
Here are the fabulous 10 stocks Mr. Cramer touted so grandly on Feb. 29, 2000, their price per share that day and where they are now: 724 Solutions, $1,882 a share then; around $4 a share today. Ariba, $132.25 then; $3 now. Digital Island, $116 then; acquired in September 2001 for $3.40 a share. Exodus Communications, $71.19 then; went belly-up in September 2001. InfoSpace, $1,085 a share then; $40 now. Inktomi, $137 then; acquired by Yahoo! in March 2003 for $1.65 a share. Mercury Interactive, $96 then; $45.50 today. Sonera, $55.80 then; acquired for about $6 a share in March 2003. Verisign, $253 then; $16 today. Veritas Software, $131 then; $27-plus now.
In retrospect, a more fitting description of Mr. Cramer's top 10 picks in February 2000, given their subsequent melancholy fate and the appreciable number that are no longer with us, rather than "The Winners of the New World" would have been, "The Winners of the Next World."
A BRIEF P.S. TO THE ABOVE. One of Mr. Cramer's super six picks -- Netflix -- after the close on Thursday reported a large loss for the first quarter and the stock immediately fell out of bed, tumbling on Friday from $37 or so to under $31.
The company, which rents DVDs via the Internet, blamed the higher cost of snaring subscribers and, by way of offset, announced it was boosting its fees. The hike in price for its offerings, incidentally, strikes us as problematic in light of the pending competition from the likes of Wal-Mart, Blockbuster, Amazon.com and cable outfits.
Earnings estimates for this year now seem reasonably suspect. As it is, Netflix's earnings are untaxed, so the 30 cents a share the company is projecting for all of 2004 is 20 cents, after taxes. Sticklers might insist that, fully taxed, the stock's P/E is really 150. But soft-hearted soul that we are, a 60 or whatever multiple is good enough for us (in fact, more than enough for us) |
